Industrial production rose 0.4 percent in February after having increased by a revised 0.2
percent in January. These gains in output represent the first consecutive monthly increases in
industrial production since August and September 2000. At 137.6 percent of its 1992 average,
output in February was 4.1 percent below that in February 2001 and 6.5 percent below its recent
peak in June 2000. Manufacturing output increased 0.3 percent in February and an upward
revised 0.3 percent in January. The output at utilities increased 2.7 percent, but the production at
mines declined 0.7 percent. Capacity utilization for total industry rose 0.3 percentage point in
February, to 74.8 percent, after having increased 0.1 percentage point in January.

The output of consumer goods rose 0.3 percent in February, thereby reversing its January
loss. Among durable consumer goods, the output of appliances, furniture, and carpeting
advanced sharply. The output of automotive products, which fell back in January after two sharp
monthly increases, decreased slightly further. The production of home electronics, which surged
late last year, also dropped back for a second month. The output of consumer nondurable goods,
which was unchanged in January, rose 0.2 percent in February. On balance, most major groups
within this category have posted small-to-moderate gains in recent months, while the output of
consumer paper products, mainly periodicals, books, and cards, has been curtailed sharply.

Business equipment remained weak; output fell 0.4 percent in February to a level 12
percent below that of a year earlier. Within this group, the output of transit equipment continued
to contract as commercial aircraft assemblies and related parts declined further. The production
of industrial and other equipment has been choppy recently, but, on balance, has continued to
slide; the farm, metalworking, and special industrial machinery industries have been particularly
weak. The output of information-processing equipment has improved recently; the output of
computers has increased, while the production of communications equipment has flattened out at
a low level. The production of defense and space equipment again rose moderately.

The output of construction supplies posted a cumulative gain of nearly 2 percent over the
three months ending in February. The production of business supplies also was up noticeably
and was led by increases in energy-related industries.

The output of materials, rebounding from sizable declines during the latter part of 2001,
rose sharply in both January and February. The improvement has been widespread in the sector.
Among durable goods materials, the output of basic metals and parts for equipment has picked
up, while the expansion in the output of parts for consumer durables, which began last autumn,
has continued. Among nondurables, the recent increases in production have been led by gains in
chemical and paper materials. The production of energy materials also rose noticeably in
February as coal and utility output increased.

Industry Groups

The gains in manufacturing output in January and February were led by a rebound in the
production of durable goods, such as steel and high-technology products, and in nondurable
goods, such as paper, chemicals, and tobacco. The gain in high-technology industries reflected
higher output of computers and semiconductors; in addition, the production of communications
equipment, which had been falling precipitously since the fourth quarter of 2000, was about
unchanged in February. The output of motor vehicles and parts, which surged toward the end of
2001, has been little changed, on net, since December. Most other durable goods industries
posted production gains in February after weak performances in January. Among other
nondurable goods, the output of printing and publishing continued to fall.

Capacity utilization in manufacturing rose 0.2 percentage point in February, to 73.2
percent; the turnaround in factory utilization began with a 0.1 percentage point increase in
January. The improvement in the utilization rate for manufacturing has been concentrated in
primary-processing industries. The utilization rate for this grouping increased 0.5 percentage
point in February after a 0.7 percentage point gain in the previous month. Although utilization
rates for several primary-processing industries have risen somewhat since the end of last year,
the bulk of the overall gain reflected a nearly 6 percentage point jump in the operating rate for
primary metals. The operating rate for advanced-processing industries edged down again;
changes for most of these industries were small. Advanced-processing industries with
exceptionally low operating rates include electrical machinery, industrial machinery and
equipment, aerospace and miscellaneous transportation equipment, apparel, and printing and
publishing.

The jump in utility output mainly reflected the return to more normal winter weather, as
temperatures in February were closer to the historic norms than during the previous few months.
Even with the increase in utility output in February, the operating rate at utilities was still nearly
3 percentage points below its 1967-2001 average. The drop in mining output pushed its
operating rate to the lowest level since June 1999.